Medidata Reports Fourth Quarter 2018 Results

1 week ago

NEW YORK–(BUSINESS WIRE)–lt;a href=”https://twitter.com/hashtag/MDSO?src=hash” target=”_blank”gt;#MDSOlt;/agt;–Medidata
(NASDAQ:MDSO) today announced its financial results for the fourth
quarter of 2018.

“In 2018, we expanded our market leadership in life sciences, and proved
that our unique data and AI capabilities can reinvent the way treatments
are developed and commercialized,” said Tarek Sherif, chairman and
chief executive officer, Medidata. “Our strong fourth quarter results
capped a year of solid execution. Greater platform adoption, high
customer satisfaction and our unique company culture, coupled with our
performance, give us great momentum heading into 2019.”

Fourth Quarter 2018 Results

Total revenue was $167.2 million, an increase of 18% compared with
$141.6 million in the fourth quarter of 2017

Subscription revenue was $141.3 million, an increase of 18% compared
with the fourth quarter of 2017. Professional services revenue was
$25.9 million, an increase of 18% compared with the fourth quarter of
2017

GAAP operating income was $11.0 million and non-GAAP operating income1
was $36.6 million, representing a GAAP and non-GAAP operating margin
of 6.6% and 21.9%, respectively

GAAP net income was $14.3 million, or $0.23 per diluted share,
compared with $17.0 million, or $0.28 per diluted share, in the fourth
quarter of 2017. Non-GAAP net income1 was $27.7 million, or
$0.45 per diluted share, compared with $27.8 million, or $0.46 per
diluted share, in the fourth quarter of 2017. See the non-GAAP
reconciliation included in this release for full details of the
non-GAAP adjustments

Full-Year 2018 Results

Total revenue was $635.7 million, an increase of 17% compared with
$544.2 million in 2017

Subscription revenue was $535.7 million, an increase of 17% from the
prior year. Professional services revenue was $100.0 million, an
increase of 16% compared with 2017

GAAP operating income was $51.3 million and non-GAAP operating income1
was $148.8 million, representing a GAAP and non-GAAP operating margin
of 8.1% and 23.4%, respectively

GAAP net income was $51.9 million, or $0.85 per diluted share,
compared with $47.6 million, or $0.80 per diluted share, in 2017.
Non-GAAP net income1 was $104.3 million, or $1.71 per
diluted share, compared with $84.9 million, or $1.42 per diluted
share, in 2017. See the non-GAAP reconciliation included in this
release for full details of the non-GAAP adjustments

Total cash and marketable securities were $240.5 million at the end of
2018, compared with $663.3 million on December 31, 2017, driven by the
acquisition of SHYFT and cash settlement of convertible notes

Additional Highlights:

Adjusted 2019 subscription backlog2 as of December 31, 2018
was $560 million, an increase of 17% compared with $480 million a year
ago. Adjusted subscription backlog, together with professional
services revenue guidance, provides 91% coverage of total revenue
based on the midpoint of full-year 2019 total revenue guidance range

Entered a strategic alliance with Cognizant in which Cognizant will
develop and deliver a comprehensive set of managed services and
solutions utilizing Medidata’s software application offerings. The
agreement exemplifies the power of Medidata’s technology combined with
the expertise of the most advanced partner ecosystem in life science

Presented with representatives of the FDA and Johns Hopkins at the
Friends of Cancer Research annual meeting, demonstrating how
Medidata’s synthetic control arm can use historical data to replicate
outcomes of a randomized control arm

As presented at the annual American Society of Hematology meeting,
Medidata’s Rave Omics – a machine learning capability – discovered
previously unknown patient subgroups that had a three times higher
response rate to a particular therapy

Revenue retention rate4 was nearly 100% for the full year

“We closed 2018 on a strong note, highlighted by Q4 subscription revenue
growth of 18% and strong bookings as our total backlog grew to nearly
$1.2 billion,” said Rouven Bergmann, chief financial officer, Medidata.
“Turning our focus to the future, it is clear that we are uniquely
positioned to capitalize on the opportunity ahead of us, and we remain
focused on building momentum across our portfolio.”

Financial Outlook

For 2019, the Company now expects:

Total revenue between $734 and $746 million, representing 16% growth
at the midpoint

Subscription revenue between $619 and $631 million, representing 17%
growth at the midpoint

Professional services revenue of approximately $115 million

GAAP operating income between $49 and $57 million. Non-GAAP operating
income5, which excludes the impact of depreciation,
amortization of intangible assets, and stock-based compensation
expense, between $175 and $183 million

GAAP net income between $39 and $46 million. Non-GAAP net income5,
which excludes the impact of stock-based compensation, amortization,
non-cash interest expense, cash compensation from acquisition-related
agreements, and any contingent consideration fair value adjustments,
tax-effected at a 25% rate, between $107 and $114 million

While changes in the stock price could change the fully diluted share
count, Medidata is assuming 62.5 million fully diluted shares

The operating and net income measures above reflect Medidata’s non-GAAP
financial guidance and the most directly comparable GAAP equivalents to
its guidance.

Conference call details:

Time:

Today, February 12, 8 a.m. ET

Conference ID:

9289627

Live dial-in:

1-877-303-2528, domestic

1-847-829-0023, international

Webcast:

investor.mdsol.com

Replay:

1-800-585-8367, domestic

1-404-537-3406, international

About Medidata

Medidata is leading the digital transformation of life sciences, with
the world’s most used platform for clinical development, commercial, and
real-world data. Powered by artificial intelligence and delivered by the
#1 ranked industry experts, the Intelligent Platform for Life Sciences
helps pharmaceutical, biotech, medical device companies, and academic
researchers accelerate value, minimize risk and optimize outcomes.
Medidata serves more than 1,000 customers and partners worldwide and
empowers more than 100,000 certified users everyday to create hope for
millions of patients. Discover the future of life sciences: www.medidata.com

Cautionary Statement

Certain statements made in this press release are “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995 that involve significant risks and uncertainties
about Medidata Solutions, Inc. (“Medidata”), including, but not limited
to, statements about Medidata’s forecast of financial performance,
products and services, business model, strategy and growth
opportunities, and competitive position. Such statements are subject to
risks and uncertainties that could cause actual performance or results
to differ materially from those expressed in these statements. Among
other things, the risks and uncertainties include those associated with
possible fluctuations in our financial and operating results;
integration activities, performance and financial impact of acquired
companies; our ability to retain and expand our customer base or
increase new business from those customers; and our ability to continue
to release, and gain customer acceptance of, new and improved versions
of our products. For additional disclosure regarding these and other
risks faced by Medidata, see disclosures contained in Medidata’s public
filings with the Securities and Exchange Commission, including the “Risk
Factors” section of Medidata’s Annual Report on Form 10-K for the year
ended December 31, 2017. You should consider these factors in evaluating
the forward-looking statements included in this press release and not
place undue reliance on such statements. The forward-looking statements
are made as of the date hereof, and Medidata undertakes no obligation to
update such statements as a result of new information, new developments
or otherwise, except as required by law.

(1) Non-GAAP Financial Information

Medidata provides non-GAAP operating income, net income, and net
income per share data as a supplement to its operating results. These
measures are not in accordance with, or an alternative to, generally
accepted accounting principles (GAAP), and may be different from
non-GAAP measures used by other companies. Management uses these
non-GAAP measures to evaluate its financial results, develop budgets,
manage expenditures, and as an important factor in determining variable
compensation. In addition, management believes, based on discussions
with investors, that these non-GAAP measures enhance investors’ ability
to assess Medidata’s historical and projected future financial
performance. While management believes these non-GAAP financial measures
provide useful supplemental information to investors, there are inherent
limitations associated with the use of non-GAAP financial measures.
Investors are encouraged to review the attached reconciliations of these
non-GAAP financial measures to the nearest comparable GAAP measures.

(3) Operating costs and expenses for the twelve months ended
December 31, 2017 include recognition of insurance recovery of
amounts associated with the previously recognized 2014 wire
transaction loss. We exclude these amounts for the purposes of
calculating non-GAAP operating income and non-GAAP net income
because we believe they are not indicative of our continuing
operations or meaningful when comparing current to past results.

(4) Interest income for the twelve months ended December 31, 2018
includes interest on wire transaction recovery that was received
during the third quarter of 2018. We exclude this amount for the
purposes of calculating non-GAAP net income because we believe it is
not indicative of our continuing operations or meaningful when
comparing current to past results.

(5) Non-cash interest expense includes amortization of debt discount
and issuance costs on our 1.00% convertible senior notes issued in
2013, which were settled on August 1, 2018, and amortization of
issuance costs on our credit agreement entered into in 2017. We
exclude this incremental non-cash interest expense for purposes of
calculating non-GAAP net income. We believe that excluding these
expenses from our non-GAAP measures is useful to investors because
such incremental non-cash interest expense does not generate a cash
outflow, nor do the debt issuance costs represent a cash outflow
except in the period of issuance; therefore both are not indicative
of our continuing operations.

(6) Elimination of gain recognized upon step acquisition of SHYFT.

(7) Tax impact calculated using tax rates of 25% and 40% for the
periods ended December 31, 2018 and 2017, respectively.

(8) Figures for the three and twelve months ended December 31, 2017
have been recast to reflect our January 1, 2018 full retrospective
adoption of ASC 606.

The table above presents a reconciliation of GAAP to non-GAAP
operating income, net income, and net income per share applicable to
common stockholders for the three and twelve months ended December
31, 2018 and 2017. Non-GAAP operating income excludes the impact of
stock-based compensation, depreciation, amortization of intangible
assets associated with acquisitions, adjustments to the fair value
of contingent consideration, cash compensation from
acquisition-related agreements, and wire transaction recovery.
Non-GAAP net income excludes the tax-affected impact of stock-based
compensation, amortization of intangible assets associated with
acquisitions, adjustments to the fair value of contingent
consideration, cash compensation from acquisition-related
agreements, wire transaction recovery and interest thereon, non-cash
interest expense, and gain on step acquisition.

MEDIDATA SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Amounts in thousands, except per share data)

December 31, 2018

December 31,2017

ASSETS

Current assets:

Cash and cash equivalents

$

105,440

$

237,325

Marketable securities

135,105

246,967

Accounts receivable, net of allowance for doubtful accounts of
$1,999 and $1,454, respectively